Deal widens Shell bitumen business
Global oil giant Shell will expand its bitumen business on the mainland by 175 per cent through the acquisition of a Hong Kong-based company as it seeks to take advantage of the government's massive rural road-building scheme.
At a press conference in Beijing yesterday, Shell announced it bought Koch Materials China, a subsidiary of American chemical company Koch Materials, for an undisclosed sum.
Koch Materials' six mainland plants have a combined production capacity of 4,200 tonnes of bitumen a day, which will be added to Shell's 2,400 tonnes a day from its five China plants.
Even before the recent launch of its 'new socialist countryside' policy, the government has been pumping billions of dollars into rural road-building.
Thanks to the new policy, mainland demand for bitumen is expected to continue its strong growth of at least 7 per cent a year over the next few years. The country will definitely be the largest market in the world 'in time', according to Shell Bitumen vice-president Egbert Veldman.
Shell's executive chairman in China, Lim Haw Kuang, yesterday said the company had invested roughly US$500 million last year in the mainland, bringing its total investment to US$3.5 billion so far.
He said Shell planned to invest a further US$500 million in the country this year.
'Shell has said it will overtake BP as the biggest single investor in China by 2007,' said Gavin Thompson, China manager of energy consultants Wood Mackenzie.
The company was expanding all areas of its downstream and upstream businesses through organic growth and acquisitions, Mr Lim said, adding it would consider all other buying opportunities.
Shell's largest single petrochemical investment is the Nanhai Petrochemical plant in Daya Bay, a US$4.3 billion joint venture with CNOOC. It is also the biggest joint venture in China's history.
